A New Era of Workplace Law for NFP organisations: Understanding the Closing the Loopholes Act

Major shake-ups in the Australian workplace law landscape are on the horizon. The Fair Work Legislation Amendment (Closing Loopholes) Act2023 (Cth) (Closing the Loopholes Act), which received Royal Assent on 14 December 2023, is set to usher in a series of significant changes aimed at fortifying worker rights and closing long-standing legislative loopholes. From addressing small business redundancy exemptions to introducing a new criminal offence of industrial manslaughter, the amendments signal a move towards creating a more equitable and safe work environment.

In this article, we delve into some of the key changes that are more relevant to NFP organisations that came into effect on 15 December 2023, shedding light on what they mean for NFP organisations and employees alike.

Closing the redundancy exemption loophole

A NFP organisation that employs fewer than 15 employees, at a particular time, is a ‘small business employer’ under section 23 of the Fair Work Act 2009 (Cth) (Fair Work Act).

If the NFP organisation made a role redundant resulting in termination of the employee’s employment the NFP organisation would determine if it were a ‘small business employer’ at the time of termination of employment and if so section 121(1)(b) of the Fair Work Act provides an exemption for the NFP organisation from the obligation to pay redundancy pay to the employee.

A loophole occurred where the NFP organisation has 15 or more employees but incrementally downsizes due to insolvency such that the number of employees falls below 15, the threshold for the small business employer, causing the employees to lose their entitlement to redundancy pay.

The Closing the Loopholes Act amends the Fair Work Act to address the loophole by inserting a new subsection 121(4) which specifically excludes the exception applying where a larger organisation downsizes to become a smaller business employer due to insolvency.

Closing the labour supply loophole

From time to time, NFP organisations are comprised on a group of entities and the staff of one entity may perform their duties in another entity, within the group. In this scenario, generally, the entity is supplying labour rather than providing a service.

If the second entity has an enterprise agreement, a workplace determination or a public service determination that applies to their own employees the first entity was not bound by that agreement or determination and accordingly may pay the labour staff less than entitled under the agreement or determination.  

The Closing the Loopholes Act amends the Fair Work Act to extend the Fair Work Commission’s (FWC) jurisdiction to make ‘same job, same pay’ orders for labour hire workers, requiring that they are paid no less than the minimum they would receive if they were directly engaged by the second entity (host employer). The aim of this is to stop large companies underpaying workers through the use of labour hire, however the amendment has the potential to extend NFP organisations supplying labour amongst the group.

The FWC can make a ‘regulated labour hire arrangement order’ if it is ‘fair and reasonable in all the circumstances, and if:

1.      an employer is supplying its employees to a host employer;

2.      the host employer is not a small business; and

3.      the host employer has an enterprise agreement, a workplace determination or a public service determination that would apply to their own employees who do the same kind of work.

The FWC’s jurisdiction commences from 15 December 2023 however, orders cannot be made until 1 November 2024.

Protections for employees subject to family and domestic violence

The Fair Work Act was recently amended by the Fair Work Amendment (Paid Family and Domestic Violence Leave) Act 2022 (Cth) to introduce 10 days of paid family and domestic violence leave in a 12-month period for full-time, part-time and casual employees. An employee who accesses this workplace right is protected from an adverse action, for example being dismissed.

However, an employee subjected to family and domestic violence that does not exercise that workplace right or another workplace right attributed to discrimination, such as sex, the employee is currently not explicitly protected against adverse action.

The Closing the Loopholes Act amends the Fair Work Act to prohibit such adverse action.

More to Unfold: Future Changes in Workplace Law

From the 1 July 2024, the Work Health and Safety Act 2011 (Cth) will include an offence of industrial manslaughter. This will apply to reckless or negligent conduct which causes the death of a worker. Individuals can face up to 25 years imprisonment and/or fines of up to $18 million for bodies corporate. The penalties have also increased five-fold under the Work Health and Safety Act 2011 (Cth), to $15 million for category one offences involving reckless or criminally negligent breaches of work health and safety duties, while maximum imprisonment will rise from 5 to 15 years.

From the 1 January 2025, the criminalisation of intentional wage theft will come into force. Intentional underpayments of wages and superannuation will have heavy penalties.

Some measures previously proposed as part of the Closing Loopholes Bill will be contained in a separate statute, The Fair Work Legislation Amendment (Closing Loopholes No.2) Bill 2023 which will be debated in the new year. This Bill proposes more complex and highly controversial amendments such as:

·        changes to the definition of casual employees, employees and employers

·        changes to the determination of employment status

·        the regulation of ‘gig’ workers

·        ability to challenge unfair contract terms in the FWC

It is proposed that the FWC will be provided with a new jurisdiction to make minimum standards order and non-binding guidelines for independent contractors. Similar to the FWC’s unfair dismissal jurisdiction, the Bill will also introduce ‘unfair deactivation’ and ‘unfair termination’ for gig workers and regulated road transport contractors respectively.

As we await the Fair Work Legislation Amendment (Closing Loopholes No.2) Bill 2023, it's crucial to stay vigilant and informed. If you would like to discuss the changes in more detail, including what they mean for your organisation, please do not hesitate to contact us.